Public instruments to support internationalization in Brazil Strategy & Innovation in Multinationals Public instruments to support internationalization in Brazil The case of Brazil machinery solutions from the perspective of executives of Mechanical capital goods Oliveira Junior M. M.; Coelho D. B. Maxime Yuma

Global economy and internationalization Article research Investigation of instrumental forms that the Brazilian government (policymaker) has chosen to use to support the internationalization of Brazilian companies Analysis of the public instruments Does it facilitate the internationalization of Brazilian companies ? The emergence of a global economic reality has shown to enterprises that international competition is not a matter of choice, but a necessity (Porter, 1986) Goal of internationalization: Explore new markets, access new technologies, gain skills, learn, and achieve economies of scale (Cyrino & Penido, 2007) International competition eventually induce and foster innovation

The Internationalization of Companies and the Role of Networks Major problem encountered psychic distance : “sum of the factors that hinder or impede the flow of information between the company and the markets” Differences in language, cultural, institutional, political, business differences, development levels Uppsala model (Johanson & Weidersheim-Paul) model for companies willing to internationalize their operations What country/market to choose ? What is the good expansion strategy to carry out in this country/market ? Importance of progressivity to reduce uncertainties specific to the foreign markets (gradually internationalize) Firms first gain experience from the domestic market before they move to foreign markets Start of foreign operations in culturally and/or geographically close countries Start of foreign operations by using traditional exports and gradually move to using more intensive and demanding operation modes (sales subsidiaries etc.)

The Internationalization of Companies and the Role of Networks What country/market to choose ? Dynamics regarding the choice of destination and entry occurs hierarchically based on the expertise about the market, with the prediction given in large part by the psychic distance What is the good expansion strategy to carry out in this country/market ? Network tends to facilitate their process of international integration, because it is capable of reducing the perceived psychic distance Network as a determinant of the choice of entry modes in foreign markets and forms of operation Reduce uncertainties to facilitate internationalization

Role of government in the internationalization of Brazilian companies Traditional role of government regarding the economy Macroeconomic policies, such as monetary and exchange policies Traditional actions of governments regarding commercial and industrial policies restricted to the strict minimum (protectionism and welfare protection of the population) New form of government policies promote an environment that induces competitive advantages capable of raising domestic companies to privileged positions in view of international competitors Foster the development of the economy both domestically and internationally to promote the country’s influence companies are the real drivers of domestic economies, since they are responsible for the jobs, income and taxes, as well as the productivity and technological externalities (Porter)

Government Policies to Support Internationalization: Scope and Dimensions Brazilian companies have been seeking international insertion as a strategy for competitiveness due to lack of growth in the domestic market Objective of the study on the government policies Analysis of the cycle of public policy Comparison of public policies between countries Challenge of the government policies Foreign environment is strongly marked by considerable uncertainty and imperfections, where the information asymmetry stands out

Classification of government policies Developed by Ipea in 2012 to classify the policies through dimensions and public instruments Dimensions of the government policies Informational support, technical assistance and other guidance reduction of information asymmetries and transaction costs Creation of comfort zone provide services and contact networks to support arrival at the destination Tax and fiscal instruments fiscal and tax incentives promoted by government entities, including exemptions, suspensions, reductions or refunds

Classification of government policies Dimensions of the government policies Risk mitigation instruments all guarantees of coverage and insurance aimed at mitigating the risks associated with currency transfer restrictions, expropriation, war and other situations of economic and political instability Financing instruments credit incentives provided by governments to their companies, notably the credit facilities specific to internationalization (preferential loans, equity and credits) International agreements institutional arrangements for the legal protection of investments and the elimination of double taxation, in particular

Study presentation Study based on Brazilian companies of mechanical capital goods from the Sector Project Brazil Machinery Solutions (Apex Brazil) Brazil Machinery Solutions program includes 176 affiliated companies Manufacture of machines for the following sectors: agricultural, plastics and containers, cement, mining and wood Network that facilitates the internationalization Partnership between these entities, whose purpose is to promote Brazilian exports of machinery and equipment, as well as strengthen the image of Brazil as a manufacturer of mechanical capital goods Present to potential buyers the quality and advantages of the Brazilian machinery and equipment Internationalized companies integrating Brazil Machinery Solutions consider the existence of government policies as a significant motivation for internationalization

Study presentation Questionnaire Qualification of the Company characterize the company by segment, size, revenue and origin of capital International Involvement If yes, insertion profile (trade, contracts, investments) If not, analysis of the internal and external barriers Motivators Justifications strategic behavior of internationalization Destinations Government Policies Evaluation of the role of government perceptions of exec. on the policies Final

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Study presentation Growth Productivity Information asymmetry Skills Policies

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Study presentation Values lower than three were assigned on average to the 6 dimensions of government policies suggests an irrelevance of the instruments provided by the government in the perspective of executives responsible for the internationalization of their companies. Governments instruments deemed the most useful: informational support and technical assistance (but considered as irrelevant)

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Conclusion Executives from companies participating in the project tend to better evaluate the impact of government policies for internationalization But the people surveyed in their totality considered the government instruments as irrelevant Small companies considered as relevant the tax and comfort zone instruments The government instruments are not considered, on average, by the respondents, as relevant factors of the international involvement of their companies. Necessity to expand the Brazilian public debate on government policies to support internationalization

Merci Beaucoup ! Muito Obrigado !